Japan Firms Look to Uranium Amid Nuclear Revival
Author: Ikuko Kao
Sumitomo Corp. and Kansai Electric Power Co., Japan's third-largest trading firm and second-ranked utility, agreed on Monday with Kazakhstan's state-run KazAtomProm to jointly develop a uranium deposit in the country.
Japan's fourth largest trader Itochu Corp. targets boosting its uranium dealing volumes to between 7,000 and 8,000 tonnes in 2010 from an estimated 4,000 tonnes in 2005, the top executive at the company's nuclear energy group told Reuters.
"We want to take upstream equities in natural uranium production and get one third of our target volumes from upstream by either direct investment or using loans," the Itochu official said, declining to be named.
Itochu struck a 10-year purchase deal in October with KazAtomProm and will market the uranium to the United States, the world's largest nuclear fuel consumer, as well as to Japan.
Kazakhstan has the world's second largest uranium reserves after Australia. The Central Asian country is welcoming foreign capital to develop uranium projects to become a major player on the world market, now dominated by Canada and Australia.
The push to secure natural sources from the world's third-largest consumer of the nuclear fuel came as Japanese electronics conglomerate Toshiba Corp. 2.was announced as the buyer of Westinghouse, the US power plant arm of British Nuclear Fuels.
Global uranium demand is expected to grow in the next couple of decades, as countries such as China plan to build nuclear power plants to meet booming demand for power.
Concerns over energy security and goals to cut greenhouse emissions from fossil fuel use are also spurring renewed global interest in building new plants, in an industry tainted by past disasters and the problem of nuclear waste disposal.
Spot uranium prices have risen to $35-$37 per pound this week, surging from around $30 last year, $20 in 2004 and $7 in 2003, industry officials say.
"Spot uranium prices will continue to rise. That is purely because of concern over supply shortage," Itochu's uranium official said.
In November, Japanese government and corporate officials visited Kazakhstan and agreed to help it to develop projects. The team included Sumitomo, Kansai Electric, Itochu, and bigger rivals Mitsubishi Corp. and Mitsui & Co.
Sumitomo will have a 25 percent stake in the uranium joint-venture APPAK. KazAtomProm will have a 65 percent share in it and 10 percent will be owned by Kansai Electric.
The three companies will initially invest $100 million to develop the Mynkuduk field in southern Kazakhstan and sell uranium largely to Japan.
Under the plan, APPAK will start production in 2007 and raise annual output to 1,000 tonnes by 2010. Sumitomo plans to take most of the radioactive metal to Japan. Japan uses about 8,000-8,500 tonnes of uranium a year to generate electricity.
Japanese companies, including Asia's largest utility Tokyo Electric Power Co. and oil refiner Idemitsu Kosan Co., also have equity in uranium projects in Canada, Australia and Niger, but not previously in Kazakh projects.
The country's trading houses also have stakes in various energy and metals projects across the globe that have boosted their profits to record-high levels.
"It's very important to look beyond oil to find a new income source especially when uranium prices are almost promised to rise to new highs," a spokesman at Sumitomo said.
Resource-poor Japan imports almost all of its oil and gas needs and has a government policy of supporting nuclear power with an aim to build five new nuclear power plants by 2010.
Japan will still have to import uranium and wants to avoid competition with China, which has also been rushing for stakes in projects and to secure resources to meet energy demand.
"We need to secure uranium stakes before the competition with China starts over again," the Sumitomo spokesman said.